Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X]

No [ ]

Indicate the number of shares outstanding of each of the registrants classes
of common stock, as of the latest practicable date.

Class

Outstanding at August 5, 2003

Class A Common Stock par value $.01 per share

71,498,328 shares

Class B Common Stock par value $.01 per share

14,990,000 shares

TABLE OF CONTENTS
INDEX
HOLLINGER INTERNATIONAL INC.

PAGE

PART I

FINANCIAL INFORMATION

3

Item 1

Condensed Consolidated Financial Statements

3

Item 2

Managements Discussion and Analysis of Financial Condition and Results of Operations

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Six Months Ended June 30, 2003 and June 30, 2002
(Amounts in Thousands, Except Per Share Data)
(Unaudited)

Three Months Ended

Six Months Ended

June 30, 2003

June 30, 2002

June 30, 2003

June 30, 2002

(Restated -

(Restated -

Notes 3(a),(c) and (d))

Notes 3(a),(c) and (d))

Operating revenues:

Advertising

$

184,207

$

179,415

$

366,691

$

354,544

Circulation

67,978

58,479

134,359

119,412

Job printing

4,283

5,019

7,959

8,809

Other

7,916

7,864

15,722

14,975

Total operating revenues

264,384

250,777

524,731

497,740

Operating costs and expenses:

Newsprint

15,765

17,274

33,764

55,864

Newsprint incurred through joint ventures

18,193

19,800

37,952

19,906

Compensation costs

82,640

76,341

163,845

152,441

Stock-based compensation



95



95

Other operating costs

104,089

97,276

207,077

187,282

Other operating costs incurred through joint ventures

11,826

10,212

24,323

21,519

Infrequent items

34

94

201

271

Depreciation

9,992

8,799

18,826

17,642

Amortization (note 3(a))

3,342

3,650

6,757

7,785

Total operating costs and expenses

245,881

233,541

492,745

462,805

Operating income

18,503

17,236

31,986

34,935

Other income (expense):

Interest expense

(6,542

)

(12,799

)

(20,470

)

(30,039

)

Amortization of deferred financing costs

(607

)

(1,232

)

(1,205

)

(3,118

)

Interest and dividend income

5,127

3,943

9,338

9,750

Foreign currency gains (losses), net (note 7)

30,599

2,812

74,578

(80,134

)

Other income (expense), net (note 7)

465

(8,305

)

(38,450

)

(31,597

)

Total other income (expense)

29,042

(15,581

)

23,791

(135,138

)

Earnings (loss) before income taxes, minority interest
and cumulative effect of change in accounting principle

47,545

1,655

55,777

(100,203

)

Income taxes (recovery)

22,331

3,216

26,520

(15,049

)

Earnings (loss) before minority interest and cumulative
effect of change in accounting principle

25,214

(1,561

)

29,257

(85,154

)

Minority interest

1,708

1,433

3,410

1,789

Earnings (loss) before cumulative effect of change in
accounting principle

23,506

(2,994

)

25,847

(86,943

)

Cumulative effect of change in accounting principle







(20,079

)

Net earnings (loss)

$

23,506

$

(2,994

)

$

25,847

$

(107,022

)

Earnings (loss) per share before cumulative effect of
change in accounting principle

Hollinger International Inc. and Subsidiaries
Condensed consolidated statements of comprehensive income (loss)
For the Three Months and Six Months Ended June 30, 2003 and June 30, 2002
(Amounts in Thousands)
(Unaudited)

Three Months Ended June 30

Six Months Ended June 30

2003

2002

2003

2002

(Restated -

(Restated -

Notes 3(a), (c) and (d))

Notes 3(a), (c) and (d))

Net earnings (loss)

$

23,506

$

(2,994

)

$

25,847

$

(107,022

)

Other comprehensive income (loss):

Unrealized gain on securities available for sale, net of taxes

355

16

4,394

258

Foreign currency translation adjustment

(12,418

)

16,309

(33,869

)

88,541

Comprehensive income (loss)

$

11,443

$

13,331

$

(3,628

)

$

(18,223

)

See accompanying notes to these condensed consolidated financial statements.

4

HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 2003 and December 31, 2002
(Amounts in Thousands)

The accompanying condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements.

In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included for the periods presented. The results of operations for interim
periods are not necessarily indicative of the results that may be expected for
the fiscal year. These condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial statements and
accompanying notes included in the Companys Annual Report on Form 10-K for the
year ended December 31, 2002.

Note 2  Principles of Presentation and Consolidation

The Company is a subsidiary of Hollinger Inc., a Canadian corporation,
which at June 30, 2003 held approximately 30.3 % of the combined equity and
approximately 72.8 % of the combined voting power of the outstanding Common
Stock of the Company.

The Condensed Consolidated Financial Statements include the accounts of
the Company and its majority owned subsidiaries. At June 30, 2003, the
Companys interest in Hollinger Canadian Newspapers, Limited Partnership
(Hollinger L.P.) was 87%.

All significant intercompany balances and transactions have been
eliminated. Certain reclassifications have been made in the 2002 financial
statements to conform to the 2003 presentation as described in Note 3 below.

Note 3  Changes in Accounting Principles and Restatements

(a) Goodwill and Other Intangible Assets

Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 142 Goodwill and Other Intangible Assets.
The new standard requires that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but instead be tested for impairment at
least annually. The standard also specifies criteria that intangible assets
must meet to be recognized and reported apart from goodwill. In addition, SFAS
No. 142 requires that intangible assets with finite useful lives be amortized
over their respective estimated useful lives to their estimated residual values
and reviewed for impairment in accordance with SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets.

Upon initial adoption of SFAS No. 142, the Company classified $117,287,000
of advertiser and subscriber relationship intangible assets as goodwill.
However, based on the consensus reached by the Emerging Issues Task Force in
Issue No. 02-17, Recognition of Customer Relationship Intangible Assets
Acquired in a Business Combination in October 2002, the Company subsequently
concluded that its advertiser and subscriber relationship intangible assets do
meet the criteria for recognition apart from goodwill under SFAS No. 142.
Therefore, during the fourth quarter of 2002 the advertiser and subscriber
relationship intangible assets were reclassified from goodwill to identifiable
intangible assets as of January 1, 2002 and continue to be amortized over 30
years.

Amortization expense was increased by $1,146,000 and $2,291,000 and income
tax expense was reduced by approximately $458,000 and $916,000 for the three
month and six month periods ended June 30, 2002, respectively, from amounts
previously reported to reflect the adjustment to amortization and related tax
effect resulting from the reclassification.

The Companys reclassification of advertiser and subscriber relationship
intangible assets apart from goodwill had no impact on the asset impairment
tests and the Companys cumulative effect of a change in accounting principle.

In connection with the SFAS No. 142 transitional impairment evaluation, by
December 31, 2002 the Company was required to assess whether goodwill was
impaired as of January 1, 2002. The Company completed its transitional
impairment test as of January 1, 2002 in the quarter ended December 31, 2002
and wrote down goodwill amounting to $20,079,000. In accordance with SFAS No.
142, the results for the three and six month periods ended June 30, 2002 have
been restated to reflect this adjustment.

The changes in the carrying amount of goodwill as of June 30, 2003, as
allocated by reportable segment for the six months ended June 30, 2003 are as
follows:

U.K.

Canadian

Chicago

Community

Newspaper

Newspaper

(In thousands)

Group

Group

Group

Group

Total

Balance as of
December 31, 2002

$

128,054

$



$

360,394

$

45,229

$

533,677

Foreign currency
translation





9,069

7,482

16,551

Balance as of June
30, 2003

$

128,054

$



$

369,463

$

52,711

$

550,228

(b) Accounting for Asset Retirement Obligations

Effective January 1, 2003, the Company adopted SFAS No. 143, Accounting for
Asset Retirement Obligations (SFAS 143). SFAS No. 143 addresses the
recognition and measurement of obligations associated with the retirement of
tangible long-lived assets. There was no material impact on the statement of
operations on adoption of this standard.

(c) Accounting for the Impairment or Disposal of Long-lived Assets

Effective January 1, 2002, the Company adopted SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 extends
discontinued operations presentation to a component of an entity that either
has been disposed of or is classified as held for sale. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.

At June 30, 2002, the Companys Business Information Group (BIG), which
publishes trade magazines in Canada, was classified as held for sale under the
provisions of SFAS No. 144 and its results were reported as discontinued
operations. Effective in the third quarter of 2002, due to changes in
circumstances, this group of assets no longer met criteria under SFAS No. 144
to be classified as held for sale. Accordingly, results for the three and six
month periods ended June 30, 2002 have been reclassified to reflect BIG as a
component of continuing operations. As a result, operating revenues increased
by $7,906,000 and operating income increased by $1,300,000 in the quarter ended
June 30, 2002 and by $14,067,000 and $1,510,000 for the six month period ended
June 30, 2002.

In April 2002, the Financial Accounting Standards Board (FASB) issued SFAS
No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections. SFAS No. 145 addresses, among
other things, the income statement treatment of gains and losses related to
debt extinguishments requiring that such expenses no longer be treated as
extraordinary items unless the items meet the definition of extraordinary per
APB Opinion No. 30, Reporting the Results of Operations  Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions. As a result of the Companys
adoption of SFAS No. 145, the Companys net after tax loss on the
extinguishment of debt of $21.3 million (pre-tax loss of $35.5 million) for the
six months ended June 30, 2002 no longer qualifies as an extraordinary item and
has been reclassified to Other income (expense), net. Similarly, losses of
$37.3 million incurred on the January 22, 2003 extinguishment of Senior
Subordinated Notes have been included in Other income (expense), net for the
six month period ended June 30, 2003.

(e) Guarantor Obligations

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (the Interpretation), which addresses
the accounting for and disclosure to be made by a guarantor in its interim and
annual financial statements about its obligations under guarantees. For
guarantees entered into or modified after December 31, 2002, the Interpretation
requires the guarantor to recognize a liability for the non-contingent
component of guarantees, being the obligation to stand ready to perform in the
event that specified triggering events or conditions occur. The initial
measurement of this liability is the fair value of the guarantee at inception.
The recognition of the liability is required even if it is not probable that
payments will be required under the guarantee or if the guarantee was issued
without a premium payment or as part of a transaction with multiple elements.
The Company had previously adopted the disclosure requirements of the
Interpretation and effective January 1, 2003, applies the recognition and
measurement provisions for all guarantees entered into or modified after
December 31, 2002. There has been no change in guarantees by the Company during
the six months ended June 30, 2003 except that the uninsured exposure in
respect of death benefits for certain journalists reporting from the Middle
East is no longer significant.

9

(f) Variable Interest Entities

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities (VIEs) which requires that companies that
control another entity through interests other than a voting interest should
consolidate the controlled entity. In the absence of clear control through a
voting equity interest, a companys exposure (variable interest) to the
economic risks and the potential rewards from a VIEs assets and activities are
the best evidence of a controlling financial interest. VIEs created after
January 31, 2003, of which the Company has none, must be consolidated
immediately. VIEs existing prior to February 1, 2003 must be consolidated by
the Company commencing with its third quarter 2003 interim financial
statements. The Company is in the process of determining whether it has any
VIEs which will require consolidation.

(g) Derivative Instruments and Hedging Activities

In April 2003, the FASB issued SFAS No. 149, Amendment of SFAS No. 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133 Accounting for Derivative Instruments and Hedging Activities. In
particular, it clarifies under what circumstances a contract with an initial
net investment meets the characteristics of a derivative as discussed in SFAS
No. 133; clarifies when a derivative contains a financing component; amends the
meaning of underlying to conform it to the language used in the FASB
Interpretation No. 45; and amends certain other existing pronouncements.

SFAS No. 149 is effective for contracts entered into or modified after June 30,
2003 and for hedging relationships designated after June 30, 2003.

Note 4  Stock-Based Compensation

The Company uses the intrinsic value based method of accounting for its
stock-based compensation arrangements. Stock options granted to employees of
The Ravelston Corporation Limited (Ravelston), the parent company of
Hollinger Inc., are recorded using the fair value based method and are
reflected as a dividend in kind. During the three and six month periods ended
June 30, 2003, such dividends amounted to nil and $8.5 million, respectively,
and are recorded as an increase to both Additional paid-in capital and
Deficit.

Had the Company determined compensation costs based on the fair value at the
grant date of its stock options under SFAS No. 123, Accounting for Stock-Based
Compensation, the Companys net earnings (loss) and net earnings (loss) per
share would have been reduced to the pro forma amounts indicated in the
following table:

The fair value of each stock option granted during the six month period ended
June 30, 2003 and 2002 was estimated on the date of grant for pro forma
disclosure purposes using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in the six month period
of each of 2003 and 2002, respectively: dividend yield of 1.89% and 3.6%;
expected volatility of 87.2% and 68.3%; risk-free interest rates of 4.25% and
4.5%; expected lives of 10 years. Weighted average fair value of options
granted by the Company during the six month periods ended June 30, 2003 and
2002 was $6.65 and $5.65, respectively. There were no new options granted in
the second quarter of 2003.

Note 5  Earnings per share

The following table reconciles the numerator and denominator for the
calculation of basic and diluted earnings (loss) per share for the three and
six month periods ended June 30, 2003 and 2002:

The Company operates principally in the business of publishing, printing
and distributing of newspapers and magazines and holds investments principally
in companies that operate in the same business as the Company. The Community
Group includes the results of the Jerusalem Post. The Canadian Newspaper Group
includes the operations of Hollinger Canadian Publishing Holdings Co. (HCPH
Co.) and Hollinger L.P. Segment information for the three and six month
periods ended June 30, 2002 has been restated to reflect the matters described
in Note 3 including the reclassification of BIG as a component of continuing
operations and the reclassification of certain components of goodwill as
identifiable intangible assets. The following is a summary of the segmented
financial data of the Company:

During March 2002, the Company significantly reduced its investment in the
Canadian Newspaper Group. Substantial Canadian dollar cash balances were
distributed to the Company, converted to United States dollars and used to
reduce long-term debt (Note 8). As a result of the substantial liquidation of
the Companys net investment in the Canadian Newspaper Group, foreign exchange
losses in the amount of $78.2 million were included in net earnings during the
six months ended June 30, 2002. These foreign exchange losses had accumulated
since the Companys original investment in the Canadian Newspaper Group and
until realized through the substantial liquidation of the Companys net
investment, had been included in the accumulated other comprehensive income
component of stockholders equity.

(c) Derivative instruments

The Company may enter into various swap, option and forward contracts from time
to time when management believes conditions warrant. Such contracts are limited
to those that relate to the Companys actual exposure to commodity prices,
interest rates and foreign currency risks. If, in managements view, the
conditions that made such arrangements worthwhile no longer exist, the
contracts may be closed. At June 30, 2002, there were no material contracts or
arrangements of these types other than the forward exchange contract related to
the Participation Trust. The foreign currency contract required the Company to
sell Cdn. $666.6 million on May 15, 2003 at a forward rate of 0.6423. In March
2002, the Company sold Cdn. $199.0 million of its foreign currency contracts at
a time when the exchange rate was 0.6308. The Company entered into additional
foreign currency contracts in March, April and May 2002 which required the
Company to sell a total of Cdn. $399.0 million on June 25, 2002 at a combined
average forward rate of 0.6378. These contracts were extended to July 26, 2002
at the forward rate of 0.6372 and further extended to September 6, 2002 at the
forward rate of 0.6364. These contracts were marked to market and the related
gains and losses included in foreign currency gains (losses), net at June 30,
2002. These agreements were terminated during the fourth quarter of 2002 in
contemplation of and in conjunction with the placement of the Senior Notes and
the Senior Credit Facility.

On December 27, 2002, a United Kingdom subsidiary of the Company entered into
two cross-currency rate swap transactions to hedge principal and interest
payments on U.S. dollar borrowings under the December 23, 2002 Senior Credit
Facility. The contracts have a total foreign currency obligation notional value
of U.S. $265 million, fixed at a rate of U.S. $1.5922 to £1, convert the
interest rate on such borrowing from floating to fixed, and expire as to $45
million on December 29, 2008 and as to $220 million on December 29, 2009.

On January 22, 2003 and February 6, 2003, Hollinger International Publishing
Inc. (Publishing), a subsidiary of the Company, entered into interest rate
swaps to convert U.S. $150 million and U.S. $100 million, respectively, of its
9% Senior Notes issued in December 2002 to floating rates for the period to
December 15, 2010, subject to early termination notice.

16

Changes in the value of derivatives comprising the forward exchange contracts
and cross-currency swaps described above amounted to a loss of $16.6 million
and a loss of $23.0 million in the three months ended June 30, 2003 and 2002,
respectively, and a loss of $15.4 million and a loss of $28.3 million for the
six months ended June 30, 2003 and 2002, respectively. These changes are
reported in foreign currency gains (losses), net on the condensed consolidated
statements of operations. The change in the value of derivatives comprising the
interest rate swaps amounted to a gain of $5.5 million in the three months
ended June 30, 2003 and a gain of $7.3 million for the six months then ended.
The changes have been reported in interest expense in the condensed
consolidated statements of operations. The fair value of these contracts as of
June 30, 2003 and December 31, 2002 is included in the condensed consolidated
balance sheets in other liabilities.

Note 8  Long-term Debt

On February 14, 2002, Publishing commenced a cash tender offer for any and all
of its outstanding 8.625% Senior Notes due 2005. On March 15, 2002, $248.9
million in aggregate principal amount had been validly tendered pursuant to the
offer and these noteholders were paid out in full. In addition, during the six
months ended June 30, 2002, Publishing purchased for retirement an additional
$6.0 million in aggregate principal amount of the 8.625% Senior Notes due 2005,
$10.1 million in aggregate principal amount of the 9.25% Senior Subordinated
Notes due 2006 and $25.0 million in aggregate principal amount of the 9.25%
Senior Subordinated Notes due 2007. The total principal amount of the
Publishing Senior and Senior Subordinated Notes retired during the six months
ended June 30, 2002 was $290.0 million. The premiums paid in 2002 to retire the
debt totaled $27.2 million and related deferred financing costs written off
totaled $8.3 million.

On December 23, 2002, Publishing completed an offering for 9% Senior Notes due
2010 in the face amount of $300.0 million as well as the closing of a Senior
Credit Facility under which $265.0 million was advanced under the term loan
provisions of that facility. Proceeds from the 9% Senior Notes and the Senior
Credit Facility were used in part to repay the $504.9 million due under
Publishings 9.25% Senior Subordinated Notes in 2006 and 2007. Publishing gave
notice of redemption to the holders of the Senior Subordinated Notes on
December 23, 2002 and retired the Notes in January 2003. Accordingly, the
Senior Subordinated Notes remained outstanding as a current liability as of
December 31, 2002 with the related financing proceeds held in escrow at that
date. Premiums on early redemption totaled $19.7 million and the write-off of
related deferred financing costs totaled $17.6 million for a loss on
extinguishment of $37.3 million.

Under the terms of the new Senior Credit Facility and the Senior Notes, the
Company is subject to certain restrictive covenants. These covenants include
certain leverage ratios and restrictions on the use of funds in certain
circumstances. If the Company were to be in violation of the restrictive
covenants, the debts could become due and payable on demand. At June 30, 2003
the Company was in compliance with all covenants under these agreements.

On March 10, 2003, the Company repurchased shares of its Class A
common stock and redeemed shares of Series E preferred stock from a
subsidiary of Hollinger Inc., its parent, and revised certain debt
arrangements it had in place with Hollinger Inc.s subsidiary. These
transactions were completed in conjunction with Hollinger Inc. closing
a private placement of Senior Secured Notes.

Contemporaneously with the closing of the private placement, the Company:

(a)

repurchased for cancellation, from one of Hollinger Inc.s wholly
owned subsidiaries, 2,000,000 shares of Class A common stock of the
Company at $8.25 per share for a total of $16.5 million; and

(b)

redeemed, from the same subsidiary of Hollinger Inc., pursuant to a
redemption request, all of the 93,206 outstanding shares of Series E
Redeemable Convertible Preferred Stock of the Company at the fixed
redemption price of Cdn. $146.63 per share being a total of $9.3
million.

As a result, Hollinger Inc.s equity and voting interests at that time were
reduced to 30.3% and 72.6%, respectively.

Proceeds from the repurchase and redemption were offset against debt due
from Hollinger Inc.s subsidiary (totaling $45.8 million as of December 31,
2002 and classified as Loan to affiliate on the condensed consolidated
balance sheet) resulting in net outstanding debt due to the Company of
approximately $20.4 million as of March 10, 2003. The debt bears interest
at 14.25% or, if paid in additional notes, 16.5% and is subordinated to the
Hollinger Inc. Notes (so long as the Notes are outstanding), guaranteed by
Ravelston, the controlling shareholder of Hollinger Inc., and secured by
certain assets of Ravelston. The debt due from the Hollinger Inc.
subsidiary originated on July 11, 2000 and represented amounts loaned to a
subsidiary of Hollinger Inc. in connection with the cash purchase by
Hollinger Inc. of Hollinger Canadian Publishing Holdings Inc. special
shares. Following the receipt of an independent fairness opinion and a
review by a committee of the Board of Directors of the Company, composed
entirely of independent directors, of all aspects of the transaction
relating to the changes in the debt arrangements with Hollinger Inc. and
the subordination of this remaining debt, the committee approved the new
debt arrangements.

The Company previously reported that the committee of independent directors
referred to had agreed to a partial offset to the remaining $20.4 million
of debt against amounts owed by the Company to Ravelston Management Inc.
(RMI), a subsidiary of Ravelston, and further stated that the offset was
effected April 30, 2003. Although
management of the Company believed final approval had been given to the
offset by the committee of independent directors, the committee has advised
that final approval of any offset remains subject to appropriate due
diligence and receipt of a further independent fairness opinion. The due
diligence process has not yet been concluded and accordingly, the
accompanying condensed consolidated financial statements do not reflect the
completion of the offset.

The Company is indebted to RMI as a consequence of the sale of NP Holdings
Company (NP Holdings) and its related tax losses to RMI on July 3, 2002.
Prior to the sale, NP Holdings had no significant assets or liabilities except for its
tax losses and an obligation to CanWest Global Communications Corp. (CanWest) for Cdn. $22.5 million. To structure
NP Holdings such that it had no material net assets or liabilities except for its tax losses upon its sale to
RMI, immediately prior to the sale the Company contributed Cdn. $22.5 million as equity to NP Holdings
and then borrowed that amount from NP Holdings by way of promissory note. As that note was offset by the CanWest obligation,
NP Holdings had no net material assets or liabilities apart from its tax losses upon sale.
Notwithstanding these transactions, the Company may have continuing direct exposure to
CanWest in respect of the Cdn. $22.5 million obligation.

As a result of an understanding that the partial offset had been completed
on April 30, 2003, Hollinger Inc.s subsidiary did not pay interest on the
full principal amount of the debt due to the Company and Ravelston did not make a payment
of $600,000 due on June 30, 2003 into a cash collateral account securing the debt.
The Company is in discussions with Hollinger Inc.s subsidiary and Ravelston
regarding these matters.

(ii)

During the first quarter of 2003, the Company made an investment of $2.5
million in a limited liability company in which a director of the Company
is a principal and has a minority interest. The funds invested are to be
used for a subsequent investment in a venture capital limited partnership.

On April 10, 2003, 3815668 Canada Inc. (the issuer of the 12 1/8% Subordinated
Debentures due 2010 received by the Company in partial consideration on sale of
certain of the Companys Canadian newspaper operations to CanWest in November 2000) notified the Company of
their intention to redeem Cdn. $265.0 million of the 12 1/8% debentures on May
11, 2003. Of the total proceeds received, $159.8 million relates to debentures
for which Participations were sold to the Participation Trust and has been paid
to the Participation Trust. The balance of $27.6 million was retained by the
Company in respect of its interest in the debentures, a portion of which it is
unable to transfer to an unaffiliated third party until November 4, 2005. Of
the proceeds retained by the Company, an estimated $19.8 million is restricted cash under
the terms of the Participation Trust and unavailable for general corporate
purposes at the present time.

Note 11  Supplemental Condensed Consolidating Financial Information

The Senior Notes due 2005 and 2010 are obligations of Publishing. These
obligations are guaranteed fully and unconditionally by the Company. No other
subsidiary of the Company or of Publishing has guaranteed the securities.

Supplemental condensed consolidating financial information of the Company and
Publishing is presented below. The Companys other directly owned subsidiary,
Hollinger Telegraph New Media LLC, is minor and therefore has not been
disclosed separately. The Companys and Publishings investments in
subsidiaries are presented on the equity method basis, and the Eliminations
column reflects the elimination of investments in subsidiaries and intercompany
balances and transactions, and the inclusion of assets and liabilities,
revenues, expenses and cash flows of Publishings subsidiaries.

19

Hollinger International Inc.
Condensed Consolidating Statement of Operations
For the three months ended June 30, 2003
(Amounts in thousands)

Hollinger

International

Inc.

Publishing

Eliminations

Consolidated

Operating revenues:

Advertising

$



$



$

184,207

$

184,207

Circulation





67,978

67,978

Job Printing





4,283

4,283

Other





7,916

7,916

Total operating revenues





264,384

264,384

Operating costs and expenses:

Newsprint



15,765

15,765

Newsprint incurred through joint ventures



18,193

18,193

Compensation costs

899

81,741

82,640

Other operating costs

341

8,596

95,152

104,089

Other operating costs incurred through
joint ventures





11,826

11,826

Infrequent items





34

34

Depreciation



326

9,666

9,992

Amortization





3,342

3,342

Total operating costs and expenses

341

9,821

235,719

245,881

Operating income (loss)

(341

)

(9,821

)

28,665

18,503

Other income (expense):

Interest expense



1,235

(7,777

)

(6,542

)

Amortization of deferred financing costs



(607

)



(607

)

Interest and dividend income

1,738

6,167

(2,778

)

5,127

Foreign currency gains (losses), net

29,347

1,149

103

30,599

Other income (expense), net

3,915

8,504

(11,954

)

465

Total other income (expense)

35,000

16,448

(22,406

)

29,042

Earnings (loss) before income taxes and
minority interest

34,659

6,627

6,259

47,545

Provision for income tax (recovery)

11,153

(2,249

)

13,427

22,331

Earnings (loss) before minority interest

23,506

8,876

(7,168

)

25,214

Minority interest



1,708

1,708

Net earnings (loss)

$

23,506

$

8,876

$

(8,876

)

$

23,506

20

Hollinger International Inc.
Condensed Consolidating Statement of Operations
For the three months ended June 30, 2002
(Amounts in thousands)

Hollinger

International

Inc.

Publishing

Eliminations

Consolidated

Operating revenues:

Advertising

$



$



$

179,415

$

179,415

Circulation





58,479

58,479

Job Printing





5,019

5,019

Other





7,864

7,864

Total operating revenues





250,777

250,777

Operating costs and expenses:

Newsprint





17,274

17,274

Newsprint incurred through joint ventures





19,800

19,800

Compensation costs



753

75,588

76,341

Stock-based compensation

95





95

Other operating costs

123

5,443

91,710

97,276

Other operating costs incurred through
joint ventures



10,212

10,212

Infrequent items





94

94

Depreciation



327

8,472

8,799

Amortization





3,650

3,650

Total operating costs and expenses

218

6,523

226,800

233,541

Operating income (loss)

(218

)

(6,523

)

23,977

17,236

Other income (expense):

Interest expense



(11,927

)

(872

)

(12,799

)

Amortization of deferred financing costs



(1,232

)



(1,232

)

Interest and dividend income

844

248

2,851

3,943

Foreign currency gains (losses), net

(4,357

)

(1,655

)

8,824

2,812

Other income (expense), net

(2,998

)

14,299

(19,606

)

(8,305

)

Total other income (expense)

(6,511

)

(267

)

(8,803

)

(15,581

)

Earnings (loss) before income taxes and
minority interest

(6,729

)

(6,790

)

15,174

1,655

Provision for income tax (recovery)

(3,735

)

(3,127

)

10,078

3,216

Earnings (loss) before minority interest

(2,994

)

(3,663

)

5,096

(1,561

)

Minority interest





1,433

1,433

Net earnings (loss)

$

(2,994

)

$

(3,663

)

$

3,663

$

(2,994

)

21

Hollinger International Inc.

Condensed Consolidating Statement of Operations
For the six months ended June 30, 2003
(Amounts in thousands)

Hollinger

International

Inc.

Publishing

Eliminations

Consolidated

Operating revenues:

Advertising

$



$



$

366,691

$

366,691

Circulation





134,359

134,359

Job Printing





7,959

7,959

Other





15,722

15,722

Total operating revenues





524,731

524,731

Operating costs and expenses:

Newsprint





33,764

33,764

Newsprint incurred through joint ventures





37,952

37,952

Compensation costs



1,853

161,992

163,845

Other operating costs

707

14,948

191,422

207,077

Other operating costs incurred through joint ventures





24,323

24,323

Infrequent items





201

201

Depreciation



652

18,174

18,826

Amortization





6,757

6,757

Total operating costs and expenses

707

17,453

474,585

492,745

Operating income (loss)

(707

)

(17,453

)

50,146

31,986

Other income (expense):

Interest expense



(6,594

)

(13,876

)

(20,470

)

Amortization of deferred financing costs



(1,205

)



(1,205

)

Interest and dividend income

2,206

12,180

(5,048

)

9,338

Foreign currency gains (losses), net

60,638

1,552

12,388

74,578

Other income (expense), net

(14,818

)

(14,746

)

(8,886

)

(38,450

)

Total other income (expense)

48,026

(8,813

)

(15,422

)

23,791

Earnings (loss) before income taxes and minority interest

47,319

(26,266

)

34,724

55,777

Provision for income tax (recovery)

21,472

(20,713

)

25,761

26,520

Earnings (loss) before minority interest

25,847

(5,553

)

8,963

29,257

Minority interest





3,410

3,410

Net earnings (loss)

$

25,847

$

(5,553

)

$

5,553

$

25,847

22

Hollinger International Inc.
Condensed Consolidating Statement of Operations
For the six months ended June 30, 2002
(Amounts in thousands)

Hollinger

International

Inc.

Publishing

Eliminations

Consolidated

Operating revenues:

Advertising

$



$



$

354,544

$

354,544

Circulation





119,412

119,412

Job Printing





8,809

8,809

Other





14,975

14,975

Total operating revenues





497,740

497,740

Operating costs and expenses:

Newsprint





55,864

55,864

Newsprint incurred through joint ventures





19,906

19,906

Compensation costs



1,556

150,885

152,441

Stock-based compensation

95





95

Other operating costs

257

11,173

175,852

187,282

Other operating costs incurred through joint
ventures





21,519

21,519

Infrequent items





271

271

Depreciation



650

16,992

17,642

Amortization





7,785

7,785

Total operating costs and expenses

352

13,379

449,074

462,805

Operating income (loss)

(352

)

(13,379

)

48,666

34,935

Other income (expense):

Interest expense



(28,976

)

(1,063

)

(30,039

)

Amortization of deferred financing costs



(3,118

)



(3,118

)

Interest and dividend income

1,640

1,558

6,552

9,750

Foreign currency gains (losses), net

24

(4,873

)

(75,285

)

(80,134

)

Other income (expense), net

(112,182

)

(75,311

)

155,896

(31,597

)

Total other income (expense)

(110,518

)

(110,720

)

86,100

(135,138

)

Earnings
(loss) before income taxes, minority
interest and cumulative effect of change in accounting principle

(110,870

)

(124,099

)

134,766

(100,203

)

Provision for income tax (recovery)

(3,848

)

(22,119

)

10,918

(15,049

)

Earnings
(loss) before minority interest and cumulative effect of change
in accounting principle

(107,022

)

(101,980

)

123,848

(85,154

)

Minority interest





1,789

1,789

Earnings (loss) before cumulative effect of change
in accounting principle

(107,022

)

(101,980

)

122,059

(86,943

)

Cumulative effect of change in accounting principle





(20,079

)

(20,079

)

Net earnings (loss)

$

(107,022

)

$

(101,980

)

$

101,980

$

(107,022

)

23

Hollinger International Inc.
Condensed Consolidating Balance Sheet
As of June 30, 2003
(Amounts in Thousands)

On May 22, 2003, the Company announced that it had reached an
agreement in principle whereby the Companys parent, Hollinger Inc. would sell some of its
holding of the Companys Class A shares to Southeastern Asset Management Inc.
(Southeastern), and would seek certain phased changes in the voting rights of
the Companys Class B shares over five years. There were also, prior and
subsequent to May 22, 2003, tentative agreements on the optimal scale of management
fees, Southeastern nominations to the Companys Board of Directors, and on
certain other matters, including possible consideration to Hollinger Inc. for
varying the super-voting rights that attach to the Companys Class B shares.
These discussions have evolved substantially but in a manner generally
consistent with what was announced May 22, 2003. As a result of publicity
accorded these discussions and the Companys affairs generally, other entities
have initiated conversations on matters related to the subjects of the
Southeastern discussions. All of these conversations are in progress, but it is
impossible at this time to foretell whether they will reach an executable
agreement, or what the nature of such an agreement might be.

Note 13 Special Committee of the Board of Directors

On May 19, 2003, a shareholder of the Company filed a Schedule 13D with the
U.S. Securities and Exchange Commission (the SEC) and, amongst other things,
served a demand letter on the Board of Directors of the Company (the Board)
requesting that the Board investigate and, if determined to be advisable, take
corrective action in respect of payments made to senior executives of the
Company in respect of non-competition agreements as previously disclosed in the
Companys financial statements. On June 11, 2003, the same shareholder filed
an Amendment to the Schedule 13D with the SEC reiterating the earlier demands
as well as requesting that the Board investigate and, if determined to be
advisable, take corrective action in respect of (i) an asset sale by the
Company to an entity affiliated with certain officers and directors of the
Company, and (ii) the payment of fees by the Company pursuant to various
affiliated management services agreements. On June 17, 2003, in response to
these requests, the Board established a special committee to conduct an
independent review and investigation of those concerns. The special
committees review and investigation are continuing. The timing and outcome of
this process is uncertain. The potential impact of the demand letters and
special committee process on the financial statements of the Company can not
now be precisely calculated but the costs of the process are estimated at between $6.0 million to $8.0
million of increased expenses in the current year. Increased expenses related to higher director and
officer insurance premiums, legal and other costs incurred in connection with
the special committees review and investigation will be reflected in the third
and subsequent quarters.

Note 14  Accounts Receivable

Reflected in the Companys condensed consolidated financial statements are amounts receivable from and payable to
CanWest. These amounts are composed of several items, including closing
adjustments arising from the sale of Canadian newspaper properties to a
subsidiary of CanWest on November 16, 2000 and
debenture interest receivable from a subsidiary of CanWest. Certain amounts,
particularly some relating to closing adjustments and totalling $46.8 million, are
currently in dispute and are to be resolved with CanWest. Inability to resolve
disagreements of amounts owing may result in matters being referred to
arbitration or formal court adjudication. Adjustments to amounts due from or
to CanWest as a consequence of negotiation or otherwise, may be material and
will be recorded as a component of net gains (losses) on sales of publishing
interest included in Other income (expense), net.

The Companys business is concentrated in the publishing, printing and
distribution of newspapers and includes the Chicago Group, the Community Group,
the U.K. Newspaper Group and the Canadian Newspaper Group. The Chicago Group
includes the Chicago Sun-Times, Post Tribune and city and suburban newspapers
in the Chicago metropolitan area. The Community Group includes the Jerusalem
Post and related publications. The U.K. Newspaper Group includes the operating
results of the Telegraph, its subsidiaries and joint ventures. The Canadian
Newspaper Group consists of its magazine and business information group and
community newspapers in western Canada, the major portion of which are held
through the Companys 87% interest in Hollinger Canadian Newspapers Limited
Partnership (Hollinger L.P.).

Effective January 1, 2003, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 143 Accounting for Asset Retirement
Obligations, as described in Note 3(b) to the Condensed Consolidated Financial
Statements.

Effective January 1, 2003, the Company adopted SFAS No. 145 Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical
Corrections as described in Note 3 (d) to the Condensed Consolidated Financial
Statements relating to the presentation of losses on debt extinguishment.

Effective January 1, 2003, the Company adopted the requirements of FASB
Interpretation No. 45 Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others as
described in Note 3(e) to the Condensed Consolidated Financial Statements with
respect to the recording of liabilities for certain guarantees.

As a result of the adoption of the above statements and interpretation, as well
as other guidance issued, and changes in circumstances affecting the manner of
presentation, the results for the three and six month periods ended June 30,
2002 have been restated as more fully described in Note 3 to the Condensed
Consolidated Financial Statements. The following discussion reflects the
restated amounts.

Managements Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the audited consolidated financial
statements, accompanying notes and other financial information included in the Annual Report on
Form 10-K for the years ended December 31, 2002, 2001 and 2000.

All statements included or incorporated by reference in this Quarterly Report
on Form 10-Q, other than statements or characterizations of historical fact,
are forward-looking statements. Examples of forward-looking statements include,
but are not limited to, statements concerning future revenues, operating
expenses, capital requirements, growth rates, cash flows, operational
performance, sources and uses of funds and acquisitions, our accounting
estimates, assumptions and judgments, the competitive nature of and anticipated
growth in our markets, the need for additional capital, changes in the
competitive climate in which the Company and our subsidiaries operate, and the
emergence of future opportunities and other factors. These forward-looking
statements are based on our current expectations, estimates and projections
about our industry, managements beliefs, and certain assumptions made by us.
Any statements that refer to expectations, projections or other
characterizations of future events or circumstances, including any underlying
assumptions, are forward-looking statements. These forward-looking statements
speak only as of the date of this Report and are based upon the information
available to us at this time. Such information is subject to change, and we
will not necessarily inform you of such changes. These statements are not
guarantees of future performance and are subject to risks, uncertainties and
assumptions that are difficult to predict. We undertake no obligation to revise
or update publicly any forward-looking statements for any reason.

29

RECENT BUSINESS DEVELOPMENTS

On May 19, 2003, a shareholder of the Company filed a Schedule 13D with the
U.S. Securities and Exchange Commission (the SEC) and, amongst other things,
served a demand letter on the Board of Directors of the Company (the Board)
requesting that the Board investigate and, if determined to be advisable, take
corrective action in respect of payments made to senior executives of the
Company in respect of non-competition agreements as previously disclosed in the
Companys financial statements. On June 11, 2003, the same shareholder filed
an Amendment to the Schedule 13D with the SEC reiterating the earlier demands
as well as requesting that the Board investigate and, if determined to be
advisable, take corrective action in respect of (i) an asset sale by the
Company to an entity affiliated with certain officers and directors of the
Company, and (ii) the payment of fees by the Company pursuant to various
affiliated management services agreements. On June 17, 2003, in response to
these requests, the Board established a special committee to conduct an
independent review and investigation of those concerns. The special
committees review and investigation are continuing. The timing and outcome of
this process is uncertain. The potential impact of the demand letters and
special committee process on the financial statements of the Company can not
now be precisely calculated but the costs of the process are estimated at $6.0 million to $8.0 million of increased expenses in
the current year. Increased expenses related to higher director and officer
insurance premiums, legal and other costs incurred in connection with the
special committees review and investigation will be reflected in the third and
subsequent quarters.

On May 22, 2003, the Company announced that it had
an agreement in principle whereby the Companys parent, Hollinger Inc. would sell some of its
holding of the Companys Class A shares to Southeastern Asset Management Inc.
(Southeastern), and would seek certain phased changes in the voting rights of
the Companys Class B shares over five years. There were also, prior and
subsequent to May 22, 2003, tentative agreements on the optimal scale of management
fees, Southeastern nominations to the Companys Board of Directors, and on
certain other matters, including possible consideration to Hollinger Inc. for
varying the super-voting rights that attach to the Companys Class B shares.
These discussions have evolved substantially but in a manner generally
consistent with what was announced May 22, 2003. As a result of publicity
accorded these discussions and the Companys affairs generally, other entities
have initiated conversations on matters related to the subjects of the
Southeastern discussions. All of these conversations are in progress, but it is
impossible at this time to foretell whether they will reach an executable
agreement, or what the nature of such an agreement might be.

CONSOLIDATED RESULTS OF OPERATIONS

Net earnings in the second quarter of 2003 amounted to $23.5 million or net
earnings of $0.27 per share compared to a net loss of $3.0 million in the
second quarter of 2002 or a net loss of $0.03 per share. Net earnings for the
six months ended June 30, 2003 were $25.8 million or $0.29 per share compared
to a restated net loss of $107.0 million or a net loss of $1.12 per share for
the six months ended June 30, 2002.

Operating revenues and operating income in the second quarter of 2003 were
$264.4 million and $18.5 million, respectively, compared with $250.8 million
and $17.2 million, respectively, in 2002. Operating revenue and operating
income for the six months ended June 30, 2003 were $524.7 million and $32.0
million, respectively, compared to $497.7 million and $34.9 million,
respectively, in 2002. The increase in operating revenue of $13.6 million and
$27.0 million, for the three and six months ended June 30, 2003, respectively,
over the prior year periods, is principally a reflection of an increase in
revenue at the U.K. Newspaper Group in U.S. dollar terms, a consequence of the
strengthening of the British pound against the U.S. dollar, with smaller
revenue gains at the Chicago Newspaper Group and the Canadian Newspaper Group.

Total operating costs and expenses increased by $12.4 million to $245.9 million
in the second quarter of 2003 from $233.5 million in the second quarter of
2002. The total operating costs and expenses for the six months ended June 30,
2003, were $492.7 million compared to $462.8 million in 2002, an increase of
$29.9 million. The increase is primarily a result of an increase in operating
costs at the U.K. Newspaper Group. That increase reflects both an actual
increase in costs measured in British pounds as well as an increase due to the
foreign exchange impact of a strengthening of the British pound against the
dollar.

30

Earnings before interest, taxes, depreciation and amortization (EBITDA) is a
financial measure of operational profitability and is presented to assist in
understanding the Companys operating results. However, it is not intended to
represent cash flow or results of operations in accordance with U.S. GAAP. The
reconciliation presented below represents a reconciliation of EBITDA to
operating income on a consolidated basis. The Companys definition and calculation of
EBITDA may be different from the definition and calculations presented by other
companies, including our competitors, and therefore EBITDA results may not be
comparable between companies.

For the three months ended

For the six months ended

June 30,

June 30,

2003

2002

2003

2002

(Restated)

(Restated)

(amounts in thousandsunaudited)

EBITDA

$

31,871

$

29,779

$

57,770

$

60,633

Less:

Infrequent items

34

94

201

271

Depreciation

9,992

8,799

18,826

17,642

Amortization

3,342

3,650

6,757

7,785

Operating income

18,503

17,236

31,986

34,935

Other income (expense):

Interest expense

(6,542

)

(12,799

)

(20,470

)

(30,039

)

Amortization of deferred financing costs

(607

)

(1,232

)

(1,205

)

(3,118

)

Interest and dividend income

5,127

3,943

9,338

9,750

Foreign currency gains (losses), net (note 7)

30,599

2,812

74,578

(80,134

)

Other income (expense), net (note 7)

465

(8,305

)

(38,450

)

(31,597

)

Total other income (expense)

29,042

(15,581

)

23,791

(135,138

)

Earnings (loss) before income taxes, minority
interest and cumulative effect of change in
accounting principle

47,545

1,655

55,777

(100,203

)

Incomes taxes (recovery)

22,331

3,216

26,520

(15,049

)

Earnings (loss) before minority interest and
cumulative effect of change in accounting
principle

25,214

(1,561

)

29,257

(85,154

)

Minority interest

1,708

1,433

3,410

1,789

Earnings (loss) before cumulative effect of
change in accounting principle

23,506

(2,994

)

25,847

(86,943

)

Cumulative effect of change in accounting
principle







(20,079

)

Net earnings (loss)

$

23,506

$

(2,994

)

$

25,847

$

(107,022

)

EBITDA for the three and six months ended June 30, 2003 was $31.9 million and
$57.8 million respectively, compared to $29.8 million and $60.6 million for the
three and six months ended June 30, 2002, respectively. The increase in EBITDA
for the three months ended June 30, 2003 compared to 2002 is due primarily to a
moderate increase in revenues at the Chicago Group combined with reduced
expenses, partially the result of favorable adjustments to the net carrying
value of inventory. Adverse quarter over quarter changes in operating results
at each of the remaining Groups due to general economic conditions, partially
offset the improvement at the Chicago Group.

Interest expense totalled $6.5 million and $20.5 million for the three and six
months ended June 30, 2003, respectively, compared with $12.8 million and $30.0
million for the same periods in 2002. This reduction is primarily the result
of lower average rates on long-term debt in the second quarter and the six
months ended June 30, 2003. The contractual rates of interest on long-term
debt were reduced through the use of a fixed to floating interest rate swap on
$250 million of the Senior Notes in part offset by a cross-currency floating to
fixed rate swap on the Senior Secured Credit Facility. Interest costs were
further reduced as a result of marking to market the value of the fixed to
floating interest rate swap.

31

Interest and dividend income was $5.1 million in the second quarter of 2003
compared with $3.9 million in the same quarter of 2002. For the six months
ended June 30, 2003 and 2002, interest and dividend income was $9.3 million and
$9.8 million, respectively. The net reduction of $0.5 million in interest and
dividend income for the six months ended June 30, 2003 compared to 2002 results
from numerous factors including the length of time during the respective
periods that funds were held for debt retirement, interest earned in the prior
year on income tax overpayments and interest on the CanWest debentures.

Net foreign currency gains in the second quarter of 2003 amounted to $30.6
million compared with $2.8 million in the second quarter of 2002. Net foreign
currency gains for the six months ended June 30, 2003 amounted to $74.6 million
compared with net foreign currency losses of $80.1 million for the same period
in 2002. Foreign exchange gains on the Participation Trust obligations were
$92.8 million and accounted for the largest portion of the gain for the six
months ended June 30, 2003 whereas losses of $78.2 million on the substantial
liquidation of the Companys investment in the Canadian Newspaper Group
accounted for the major portion of the loss in 2002. Gains on the
Participation Trust obligation were partially offset by mark to market losses
of $15.5 million on the cross-currency swaps during the six months ended June
30, 2003.

Net other income (expense) in the second quarter of 2003 amounted to income of
$0.5 million compared to a net expense of $8.3 million in the second quarter of
2002. For the six months ended June 30, 2003 and 2002, net other expense was
$38.5 million and $31.6 million, respectively. The net other income in the
second quarter of 2003 consisted primarily of a gain on the sale of investments
made in two new media companies partially offset by losses from the Companys
share of certain joint venture operations. The net expense of $8.3 million in
the second quarter of 2002 was due primarily to a loss on the Total Return
Equity Swaps of $6.2 million. For the six months ended June 30, 2003, the
expense consisted primarily of the write-off of deferred financing costs and
premiums paid of $37.3 million on the redemption of the Companys 9.25% Senior
Subordinated Notes in January 2003. Other income (expense), net for the six
months ended June 30, 2002 amounted to a loss of $31.6 million and primarily
consisted of the write-off of deferred financing charges and premiums paid on
the redemption of the Companys 8.625% Senior Notes totalling $35.5 million,
offset by gains on the Total Return Equity Swap of $2.4 million and net gains
on sales of assets totalling $5.5 million.

Minority interest in the second quarter of 2003 totalled $1.7 million compared
to $1.4 million in 2002. Minority interest for the six months ended June 30,
2003 and 2002 was $3.4 million and $1.8 million, respectively. Minority
interest represents the minority share of net earnings of Hollinger L.P. The
increase is due primarily to foreign exchange gains in Hollinger L.P. as a
result of the strengthening of the Canadian dollar.

Income tax expense was $22.3 million and $26.5 million for the three and six
month periods ended June 30, 2003, respectively, and $3.2 million and a
recovery of $15.0 million in the comparable 2002 periods, respectively. The
effective tax rate for the six months ended June 30, 2003 was approximately
47.5%. This is higher than the statutory rate due to non-deductibility of
certain expenses and mark to market derivative losses and the impact of
withholding taxes, offset in part by the utilization of tax losses, for which
the related tax asset had a valuation allowance for its full amount. For the
six months ended June 30, 2002, the effective tax rate was approximately 15.0%.
This rate is lower than the statutory rate primarily because the Company
incurred a loss on foreign currency of approximately $72.0 million, which was
not deductible for tax purposes.

32

Three Months Ended June 30,

Six Months Ended June 30,

2003

2002

2003

2002

(dollar amounts in thousands)

(dollar amounts in thousands)

(Restated)

(Restated)

Operating revenues:

Chicago Group

$

115,985

$

113,464

$

221,999

$

218,199

Community Group

2,589

3,877

5,331

7,102

U.K. Newspaper Group

123,377

114,458

257,932

237,997

Canadian Newspaper Group

22,433

18,978

39,469

34,442

Investment and Corporate Group









Total operating revenue

$

264,384

$

250,777

$

524,731

$

497,740

Operating income (loss)

Chicago Group

$

19,089

$

13,024

$

25,383

$

16,589

Community Group

(1,338

)

(672

)

(3,056

)

(1,858

)

U.K. Newspaper Group

8,198

9,106

24,777

31,525

Canadian Newspaper Group

24

587

(1,493

)

(1,467

)

Investment and Corporate Group

(7,470

)

(4,809

)

(13,625

)

(9,854

)

Total operating income

$

18,503

$

17,236

$

31,986

$

34,935

Operating revenues:

Chicago Group

43.9

%

45.2

%

42.3

%

43.9

%

Community Group

1.0

%

1.6

%

1.0

%

1.4

%

U.K. Newspaper Group

46.6

%

45.6

%

49.2

%

47.8

%

Canadian Newspaper Group

8.5

%

7.6

%

7.5

%

6.9

%

Investment and Corporate Group

0.0

%

0.0

%

0.0

%

0.0

%

Total operating revenue

100.0

%

100.0

%

100.0

%

100.0

%

Operating income (loss)

Chicago Group

103.2

%

75.6

%

79.4

%

47.5

%

Community Group

-7.2

%

-3.9

%

-9.6

%

-5.3

%

U.K. Newspaper Group

44.3

%

52.8

%

77.5

%

90.2

%

Canadian Newspaper Group

0.1

%

3.4

%

-4.7

%

-4.2

%

Investment and Corporate Group

-40.4

%

-27.9

%

-42.6

%

-28.2

%

Total operating income

100.0

%

100.0

%

100.0

%

100.0

%

Operating income margin:

Chicago Group

16.5

%

11.5

%

11.4

%

7.6

%

Community Group

Neg

Neg.

Neg.

Neg.

U.K. Newspaper Group

6.6

%

8.0

%

9.6

%

13.2

%

Canadian Newspaper Group

0.1

%

3.1

%

Neg

Neg.

Investment and Corporate Group

N/A

N/A

N/A

N/A

Total operating income margin

7.0

%

6.9

%

6.1

%

7.0

%

33

Three Months Ended June 30,

Six Months Ended June 30,

2003

2002

2003

2002

(dollar amounts in thousands)

(dollar amounts in thousands)

(Restated)

(Restated)

Chicago Group

Operating revenue

Advertising

$

91,040

$

87,885

$

172,228

$

167,265

Circulation

21,805

22,852

43,815

45,704

Job printing and other

3,140

2,727

5,956

5,230

Total operating revenue

115,985

113,464

221,999

218,199

Operating costs

Newsprint

13,337

15,519

29,592

32,314

Compensation costs

41,994

42,645

85,315

85,698

Other operating costs

33,769

33,892

65,884

66,263

Infrequent items

34

94

201

271

Depreciation

4,420

4,640

8,867

9,279

Amortization

3,342

3,650

6,757

7,785

Total operating costs

96,896

100,440

196,616

201,610

Operating income

$

19,089

$

13,024

$

25,383

$

16,589

Community Group

Operating revenue

Advertising

$

928

$

1,023

$

1,802

$

2,009

Circulation

1,407

1,427

2,936

2,972

Job printing and other

254

1,427

593

2,121

Total operating revenue

2,589

3,877

5,331

7,102

Operating costs

Newsprint

169

434

474

895

Compensation costs

1,720

1,888

3,218

3,783

Other operating costs

1,643

1,822

4,093

3,510

Depreciation

395

405

602

772

Total operating costs

3,927

4,549

8,387

8,960

Operating loss

$

(1,338

)

$

(672

)

$

(3,056

)

$

(1,858

)

U.K. Newspaper Group

Operating revenue

Advertising

$

75,439

$

77,032

$

163,730

$

160,966

Circulation

41,747

31,210

81,956

65,162

Job printing and other

6,191

6,216

12,246

11,869

Total operating revenue

123,377

114,458

257,932

237,997

Operating costs

Newsprint

18,193

19,800

37,952

39,985

Compensation costs

26,489

22,547

52,274

44,612

Other operating costs

66,807

59,986

135,761

115,749

Depreciation

3,690

3,019

7,168

6,126

Total operating costs

115,179

105,352

233,155

206,472

Operating income

$

8,198

$

9,106

$

24,777

$

31,525

34

Three Months Ended June 30,

Six Months Ended June 30,

2003

2002

2003

2002

(dollar amounts in thousands)

(dollar amounts in thousands)

(Restated)

(Restated)

Canadian Newspaper Group

Operating revenue

Advertising

$

16,800

$

13,475

$

28,931

$

24,304

Circulation

3,019

2,990

5,652

5,574

Job printing and other

2,614

2,513

4,886

4,564

Total operating revenue

22,433

18,978

39,469

34,442

Operating costs

Newsprint

2,259

1,321

3,698

2,576

Compensation costs

11,533

8,506

21,179

16,788

Other operating costs

8,221

8,220

15,384

15,856

Depreciation

396

344

701

689

Total operating costs

22,409

18,391

40,962

35,909

Operating income (loss)

$

24

$

587

$

(1,493

)

$

(1,467

)

Investment and Corporate Group

Operating revenue

Advertising

$



$



$



$



Circulation









Job printing and other









Total operating revenue









Operating costs

Newsprint









Compensation costs

904

755

1,859

1,560

Other operating costs

5,475

3,568

10,278

7,423

Stock-based compensation



95



95

Depreciation

1,091

391

1,488

776

Total operating costs

7,470

4,809

13,625

9,854

Operating loss

$

(7,470

)

$

(4,809

)

$

(13,625

)

$

(9,854

)

35

Three Months Ended June 30,

Six Months Ended June 30,

2003

2002

2003

2002

Percentage

Percentage

Percentage

Percentage

(Restated)

(Restated)

Chicago Group

Operating revenue

Advertising

78.5

%

77.5

%

77.6

%

76.7

%

Circulation

18.8

%

20.1

%

19.7

%

20.9

%

Job printing and other

2.7

%

2.4

%

2.7

%

2.4

%

Total operating revenue

100.0

%

100.0

%

100.0

%

100.0

%

Operating costs

Newsprint

11.5

%

13.7

%

13.3

%

14.8

%

Compensation costs

36.2

%

37.6

%

38.4

%

39.3

%

Other operating costs

29.1

%

29.9

%

29.7

%

30.4

%

Infrequent items

0.0

%

0.0

%

0.1

%

0.1

%

Depreciation

3.8

%

4.1

%

4.0

%

4.2

%

Amortization

2.9

%

3.2

%

3.1

%

3.6

%

Total operating costs

83.5

%

88.5

%

88.6

%

92.4

%

Operating income

16.5

%

11.5

%

11.4

%

7.6

%

Community Group

Operating revenue

Advertising

35.8

%

26.4

%

33.8

%

28.3

%

Circulation

54.4

%

36.8

%

55.1

%

41.8

%

Job printing and other

9.8

%

36.8

%

11.1

%

29.9

%

Total operating revenue

100.0

%

100.0

%

100.0

%

100.0

%

Operating costs

Newsprint

6.5

%

11.2

%

8.9

%

12.6

%

Compensation costs

66.4

%

48.7

%

60.3

%

53.3

%

Other operating costs

63.5

%

47.0

%

76.8

%

49.4

%

Depreciation

15.3

%

10.4

%

11.3

%

10.9

%

Total operating costs

151.7

%

117.3

%

157.3

%

126.2

%

Operating loss

-51.7

%

-17.3

%

-57.3

%

-26.2

%

U.K. Newspaper Group

Operating revenue

Advertising

61.1

%

67.3

%

63.5

%

67.6

%

Circulation

33.9

%

27.3

%

31.8

%

27.4

%

Job printing and other

5.0

%

5.4

%

4.7

%

5.0

%

Total operating revenue

100.0

%

100.0

%

100.0

%

100.0

%

Operating costs

Newsprint

14.8

%

17.3

%

14.7

%

16.8

%

Compensation costs

21.5

%

19.7

%

20.3

%

18.8

%

Other operating costs

54.1

%

52.4

%

52.6

%

48.6

%

Depreciation

3.0

%

2.6

%

2.8

%

2.6

%

Total operating costs

93.4

%

92.0

%

90.4

%

86.8

%

Operating income

6.6

%

8.0

%

9.6

%

13.2

%

36

Three Months Ended June 30,

Six Months Ended June 30,

2003

2002

2003

2002

Percentage

Percentage

Percentage

Percentage

(Restated)

(Restated)

Canadian Newspaper Group

Operating revenue

Advertising

74.9

%

71.0

%

73.3

%

70.5

%

Circulation

13.5

%

15.8

%

14.3

%

16.2

%

Job printing and other

11.6

%

13.2

%

12.4

%

13.3

%

Total operating revenue

100.0

%

100.0

%

100.0

%

100.0

%

Operating costs

Newsprint

10.1

%

7.0

%

9.4

%

7.5

%

Compensation costs

51.4

%

44.8

%

53.6

%

48.7

%

Other operating costs

36.6

%

43.3

%

39.0

%

46.1

%

Depreciation

1.8

%

1.8

%

1.8

%

2.0

%

Total operating costs

99.9

%

96.9

%

103.8

%

104.3

%

Operating income (loss)

0.1

%

3.1

%

-3.8

%

-4.3

%

37

GROUP OPERATING RESULTS

Chicago Group

Operating revenues for the Chicago Group were $116.0 million and $222.0 million
for the three and six months ended June 30, 2003, respectively, compared to
$113.5 million and $218.2 million for the three and six month periods ended
June 30, 2002, respectively, which is an increase of $2.5 million or 2.2% for
the quarter and $3.8 million or 1.7% for the six months ended June 30.
Advertising revenue was $91.0 million in the second quarter of 2003 and $172.2
million in the six months ended June 30, 2003, compared with $87.9 million in
the second quarter of 2002 and $167.3 million in the six months ended June 30,
2002, increases of $3.1 million or 3.5% and $4.9 million or 2.9%, respectively.
The second quarter increase results from higher advertising revenue in each of
retail and national advertising.

Circulation revenue was $21.8 million and $43.8 million for the three and six
months ended June 30, 2003, respectively, compared with $22.9 million and $45.7
million for the comparable periods in 2002, decreases of $1.1 million or 4.8%
and $1.9 million or 4.2%, respectively. The decline in circulation revenue
continues to be attributable to price discounting, particularly in the home
delivery market. Although home delivery circulation has increased, single copy
sales have declined from the prior year in large part as a consequence of free
circulation papers offered by the Chicago Group and its primary competitor.
Printing and other revenue was $3.1 million in the second quarter of 2003 and
$6.0 million in the six months ended June 30, 2003, compared with $2.7 million
and $5.2 million in 2002, increases of $0.4 million and $0.8 million,
respectively.

Total operating costs in the second quarter of 2003 were $96.9 million and in
the six months ended June 30, 2003 were $196.6 million compared with $100.4
million and $201.6 million in 2002, decreases of $3.5 million and $5.0 million,
respectively.

Newsprint expense in the second quarter was $13.3 million compared with $15.5
million in 2002, a decrease of $2.2 million or 14.2% in the quarter. Total
newsprint consumption in the quarter increased approximately 5% compared with
the second quarter of 2002, but the average cost per tonne of newsprint in the
second quarter of 2003 was approximately 5% lower than in the second quarter of
2002. Newsprint expense in the six months ended June 30, 2003 was $29.6 million
compared with $32.3 million in 2002, a decrease of $2.7 million. Reflected in
newsprint costs is a book to physical inventory adjustment and a favorable
recovery against an inventory provision for unusable newsprint which reduced
newsprint expense for each of the three and six months ended June 30, 2003 by
$2.2 million.

Compensation costs in the second quarter of 2003 were $42.0 million and in the
six months ended June 30, 2003 were $85.3 million compared with $42.6 million
and $85.7 million, respectively, in 2002, decreases of $0.6 million and $0.4
million, respectively. The modest declines in wages and salaries were partially
offset by increased employee benefit costs for the three and six months ended
June 30, 2003.

Other operating costs in the second quarter of 2003 were $33.8 million and in
the six months ended June 30, 2003 were $65.9 million compared with $33.9
million and $66.3 million in 2002, decreases of $0.1 million or 0.3% and $0.4
million or 0.6%, respectively. The decrease in other operating costs resulted
from general cost reductions across all areas. Depreciation and amortization in
the second quarter of 2003 was $7.8 million and in the six months ended June
30, 2003 was $15.6 million compared with $8.3 million and $17.1 million in
2002, reductions of $0.5 million and $1.5 million, respectively.

Operating income in the second quarter of 2003 was $19.1 million and in the six
months ended June 30, 2003 was $25.4 million compared with $13.0 million and
$16.6 million in 2002, increases of $6.1 million and $8.8 million,
respectively. The increases result primarily from higher revenues combined with
lower newsprint, compensation and other operating costs.

38

U.K. Newspaper Group

Operating revenues for the U.K. Newspaper Group were $123.4 million in the
second quarter of 2003 compared with $114.5 million in 2002, an increase of
$8.9 million or 7.8%. In the six months ended June 30, 2003 operating revenues
were $257.9 million compared with $238.0 million in 2002, an increase of $19.9
million or 8.4%. In pounds sterling, operating revenues in the second quarter
of 2003 were £76.2 million compared with £78.3 million in 2002, a decrease of
£2.1 million or 2.7%. For the six months ended June 30, 2003 operating revenues
were £160.1 million compared with £164.9 million in 2002, a decrease of £4.8
million or 2.9%.

The decrease in operating revenue, in local currency, was mainly the result of
lower advertising revenue, which, in local currency, was £46.5 million in the
second quarter of 2003 compared with £52.7 million in 2002, a decrease of £6.2
million or 11.8%. In the six months ended June 30, 2003 advertising revenue, in
local currency, was £101.7 million compared with £111.5 million in 2002, a
decrease of £9.8 million or 8.8%. Recruitment advertising revenue decreased by
28.9% and display advertising revenue decreased 10.0% in the second quarter
year over year due to the continuing advertising recession in the U.K.

Circulation revenue, in local currency, was £25.8 million in second quarter
2003 compared with £21.4 million in 2002, an increase of £4.4 million or 20.6%.
For the six months ended June 30, 2003 circulation revenue, in local currency,
was £50.9 million compared with £45.2 million in 2002, an increase of £5.7
million or 12.6%. Circulation volume has declined during 2003 from that in the
prior year period as a result of managements decision to reduce both bulk and
foreign print sales and to reinvest the significant associated costs in
developing and marketing the newspapers. In spite of the planned reductions in
circulation, The Daily Telegraph had an average daily circulation of 915,000 in
June. Those declines were compensated for by the impact of a price increase
implemented in September of 2002 and, as price increases are only implemented
as existing voucher programs expire, the continuing impact of a September 2001
price increase. In addition, the circulation revenue for the second quarter of
2002 was reduced by a £2.2 million provision following a revised estimate of
expected redemption rates for vouchers issued principally prior to the second
quarter of 2002 to attract new sales.

Total operating costs in the second quarter of 2003 were $115.2 million and in
the six months ended June 30, 2003 were $233.2 million compared with $105.4
million and $206.5 million in 2002, which are increases of $9.8 million and
$26.7 million, respectively. In local currency, total operating costs in the
second quarter of 2003 were £71.2 million compared to £72.1 million in 2002, a
decrease of £0.9 million or 1.2%. For the six months ended June 30, 2003,
operating costs were £144.8 million compared with £143.0 million in 2002, which
represents an increase of £1.8 million or 1.3%.

Newsprint costs for the second quarter of 2003, in local currency, were £11.2
million compared with £13.5 million in 2002, a decrease of £2.3 million or
17.0%. In the six months ended June 30, 2003 newsprint costs, in local
currency, were £23.6 million compared with £27.7 million in 2002, a decrease of
£4.1 million or 14.8%. The decrease results from a 7.8% reduction in
consumption due to lower pagination as a result of lower advertising revenue
and the reduction of bulk and foreign production, and a 7.7% reduction in the
average price per tonne of newsprint.

Compensation costs for the second quarter of 2003, in local currency, were
£16.4 million compared with £15.4 million in 2002, an increase of £1.0 million
or 6.5%. In the six months ended June 30, 2003 compensation costs, in local
currency, were £32.4 million compared with £30.9 million in 2002, an increase
of £1.5 million or 4.9%.

Other operating expenses, in local currency, were £41.3 million in the second
quarter of 2003 compared with £41.0 million in 2002, an increase of £0.3
million or 0.7%. In the six months ended June 30, 2003 other operating costs in
local currency, were £84.3 million compared with £80.1 million in 2002, an
increase of £4.2 million or 5.2%. The year over year increase in costs for the
six months ended June 30, 2003 relates primarily to increased marketing
activities in the first quarter.

Depreciation and amortization for the three and six months ended June 30, 2003
was £2.3 million and £4.4 million, respectively, compared with £2.1 million and
£4.2 million, respectively, in 2002.

39

Canadian Newspaper Group

Operating revenues in the Canadian Newspaper Group in the second quarter of
2003 were $22.4 million compared with $19.0 million in 2002 and for the six
months ended June 30, 2003 were $39.5 million compared with $34.4 million in
2002. The 2002 amounts previously reported have been restated to consolidate
the results of the Business Information Group, which had previously been
reflected as a discontinued operation. During the third quarter of 2002, due
to changes in circumstances this group of assets no longer met the criteria
under SFAS No. 144, Accounting for Impairment or Disposal of Long-lived
Assets to be classified as held for sale. Accordingly, the results of the
Business Information Group have been incorporated into the continuing
operations of the Canadian Newspaper Group.

The operating income of the Canadian Newspaper Group was break-even in the
second quarter of 2003 compared with operating income of $0.6 million in 2002
and was a loss of $1.5 million for each of the six months ended June 30, 2003
and 2002. The results for the Canadian Newspaper Group include pension and
post-retirement obligation expense of Cdn. $1.9 million and $3.8 million for
the three and six months ended June 30, 2003 relating to employees formerly
employed by Southam Publications and in respect of whom the obligations were
not assumed by CanWest, purchaser of the related newspapers.

Community Group

Operating revenue and operating income for the Community Group were $2.6
million and a loss of $1.3 million in the second quarter of 2003 compared with
$3.9 million and a loss of $0.7 million in 2002. Operating revenue and
operating income for the six months ended June 30, 2003 were $5.3 million and a
loss of $3.1 million compared with $7.1 million and a loss of $1.9 million in
2002. The declines in revenue and increases in operating losses are primarily
attributable to the loss of business under a contract for the printing of a
commercial telephone directory.

Corporate Group

Operating costs of the Corporate Group were $7.5 million in the second quarter
of 2003 compared with $4.8 million in 2002. In the six months ended June 30,
2003 operating costs were $13.6 million compared with $9.9 million in 2002.

LIQUIDITY AND CAPITAL RESOURCES

Working Capital

Working capital consists of current assets less current liabilities. At June
30, 2003, working capital, excluding debt obligations, was a deficiency of
$253.5 million excluding restricted cash compared to a deficiency of $228.1
million at December 31, 2002 excluding funds held in escrow to repay debt.
Current assets were $374.6 million at June 30, 2003 and $347.8 million at
December 31, 2002 excluding escrow funds and restricted cash. Current
liabilities, excluding debt obligations, were $628.1 million at June 30, 2003,
compared with $575.9 million at December 31, 2002.

The Company is an international holding company and its assets consist solely
of investments in its subsidiaries and affiliated companies. As a result, the
Companys ability to meet its future financial obligations is dependent upon
the availability of cash flows from its United States and foreign subsidiaries
through dividends, intercompany advances, management fees and other payments.
Similarly, the Companys ability to pay dividends on its common stock and its
preferred stock may be limited as a result of its dependence upon the
distribution of earnings of its subsidiaries and affiliated companies. The
Companys subsidiaries and affiliated companies are under no obligation to pay
dividends and, in the case of Publishing and its principal United States and
foreign subsidiaries, are subject to statutory restrictions and restrictions in
debt agreements that limit their ability to pay dividends. Substantially all of

40

the shares of the subsidiaries of the Company have been pledged to lenders of
the Company. The Companys right to participate in the distribution of assets
of any subsidiary or affiliated company upon its liquidation or reorganization
will be subject to the prior claims of the creditors of such subsidiary or
affiliated company, including trade creditors, except to the extent that the
Company may itself be a creditor with recognized claims against such subsidiary
or affiliated company.

Debt

Long-term debt, including the current portion, was $576.4 million at June 30,
2003 compared with $1,084.4 million at December 31, 2002. During the first six
months of 2003, the Company retired $504.9 million principal amount of Senior
Subordinated Notes, repaid $1.7 million of debt due under its Senior Credit
Facility and reduced other debt by $1.4 million. Under the terms of the Senior
Credit Facility, the Company is required to repay $2.2 million of amounts
advanced as term debt during the remainder of 2003.

During the term of the Senior Credit Facility, the Company is required to make
partial principal repayments in each year as follows:

(in thousands)

2003

$

3,875

2004

7,263

2005

9,513

2006

11,762

2007

14,012

Later years

218,575

$

265,000

Under the terms of the new Senior Credit Facility and the 9% Senior Notes, the
Company is subject to certain restrictive covenants. These covenants include
certain leverage ratios and restrictions on the use of funds in certain
circumstances. If the Company were to be in violation of the restrictive
covenants, the debts could become due and payable on demand. At June 30, 2003
the Company was in compliance with all covenants under these agreements.

Cash Flows

Cash flows provided by operating activities were $31.1 million for the six
months ended June 30, 2003, compared with $4.4 million in 2002. Excluding
changes in working capital (other than cash), cash flows provided by operating
activities were $34.5 million in 2003 and $8.5 million in 2002.

Cash flows provided by investing activities in the six months ended June 30,
2003 were $6.8 million compared with cash flows used in investing activities of
$12.2 million in 2002. The primary reason for this change is the receipt of
proceeds on the disposal of investments and other assets in 2003 and reduced
capital expenditures.

Cash flows used in financing activities in the six months ended June 30, 2003
were $37.8 million and cash flows used in financing activities were $308.2
million in 2002. In the first quarter of 2003, the Company repaid $504.9
million of long-term debt from escrow deposits and restricted cash on hand at
December 31, 2002 which was raised upon issuance of the 9% Senior Notes and
completion of the Senior Credit Facility. In 2002, the Company repaid $291.3
million of long-term debt primarily from available cash balances. Long-term
debt repayments as disclosed in the Condensed Consolidated Statements of Cash
Flows include both principal repayments and premiums paid on extinguishment of
debt.

41

Capital Expenditures

The Chicago Group, the Community Group, the U.K. Newspaper Group and the
Canadian Newspaper Group have funded their capital expenditures out of cash
provided by their respective operating activities and anticipate that they will
have sufficient cash flow to continue to do so.

42

Dividends and Other Commitments

The amount available for the payment of dividends and other obligations by the
Company at any time is a function of (i) restrictions in agreements binding the
Company limiting its ability to pay dividends, management fees and other
payments and (ii) restrictions in agreements binding the Companys subsidiaries
limiting their ability to pay dividends, management fees and other payments to
the Company. The Company is party to a debt agreement that permits the payment
of dividends at the present rate, however, certain agreements binding
Publishing and other subsidiaries of the Company contain restrictive
provisions, which may limit amounts available to the Company for the payment of
dividends.

Although the amount available for the payment of dividends and other
obligations by the Company at any time is limited, as described above, the
Company expects its internal cash flow and financing resources to be adequate
to meet its foreseeable requirements.

Outlook

The Company expects its full year operating income to be in the range
of $54 million to $62 million which is less than the guidance of $65 million to
$75 million that the Company provided earlier in its release of April 2, 2003.

The Companys EBITDA is expected to be affected by non-recurring
items, particularly the costs of and associated with the review now being conducted by the Special Committee
of the Board of Directors, and undertaken in response to the concerns of a shareholder. A thorough
and independent inquiry into the matters raised leading up to the announcement of the formation
of the Special Committee on June 17, 2003, will produce higher legal costs and insurance
premiums than could have been foreseen when the Companys original forecast was made. The
present estimate of these costs is from $6 million to $8 million.

The new forecast also reflects continued softness in the U.K. newspaper
advertising market, which has persisted longer than was generally expected.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

Newsprint Newsprint prices continued to fluctuate during the past twelve
months. On a consolidated basis newsprint expense amounted to $71.7 million in
the first six months of 2003 and $75.8 million in 2002. Management believes
that newsprint prices could continue to show significant price variations in
the future. Suppliers implemented a newsprint price increase of $35 per tonne
during the second quarter of 2003 the effect of which will be limited to our
Chicago Group and Canadian Group operations. In the United Kingdom, newsprint
prices payable by the Company in 2003 pursuant to longer-term contracts are
less than the average prices paid in 2002. Operating divisions take steps to
ensure that they have sufficient supply of newsprint and have mitigated cost
increases by adjusting pagination and page sizes and printing and distributing
practices. Based on levels of usage, during the six months ended June 30, 2003,
a change in the price of newsprint of $50 per tonne would increase or decrease
net income for the six month period by about $4.5 million.

Inflation During the past three years, inflation has not had a material
effect on the Companys newspaper business in the United States, United Kingdom
and Canada.

Interest Rates At June 30, 2003, the Company had debt totaling $250.0
million which is subject to interest calculated at floating rates as a
consequence of fixed to floating swaps arranged by the Company. The current
rates of interest are reset every six months in arrears on June 15 and December
15. A 1% change in the interest rate would result in a change in interest costs
in respect of such debt of $0.6 million for the quarter and $1.2 million for
the six month period ended June 30, 2003.

Foreign Exchange Rates A substantial portion of the Companys income is
earned outside of the United States in currencies other than the United States
dollar. As a result the Companys income is vulnerable to changes in the value
of the United States dollar. Increases in the value of the United States dollar
can reduce net earnings and declines can result in increased earnings. Based on
earnings and ownership levels for the six months ended June 30, 2003, a $0.05
change in the important foreign currencies would have the following effect on
the Companys reported net earnings for the six months ended June 30, 2003:

Actual Average

2003 Rate

Increase/Decrease

United Kingdom

$

1.61/£

$

50,000

Canada

$0.69/Cdn.$

$

35,656,000

(1)

(1)

Included in the increase/decrease noted is $34.6 million
in respect of the Companys sale of Participations as
noted below.

In 2001, the Company sold Participations in Cdn. $756.8 million principal
amount of CanWest debentures to a special purpose trust (Participation
Trust). In respect of these debentures, based on the original Canadian
principal

43

amount, the Company would eventually be required to deliver to the
Participation Trust, debentures with a principal amount equivalent to $490.5
million, which equates to a fixed rate of exchange of 0.6482 U.S.
dollars to each Canadian dollar as well as additional debentures in respect of
the paid-in-kind interest at the same fixed rate of exchange. During the second
quarter of 2003, CanWest redeemed a total of Cdn. $265.0 million principal
amount of debentures and, of the total proceeds received $159.8 million was
paid to the Participation Trust. Upon receipt of the notice of redemption, the
Company entered into a U.S. dollar forward purchase contract for the full
amount of the Canadian dollar redemption proceeds to coincide with the date of
receipt of the proceeds. At June 30, 2003, the obligation to the Participation
Trust was $447.9 million, and the corresponding CanWest debentures had a
principal amount receivable of Cdn. $691.1 million.

As the requirement to deliver debentures is a U.S. dollar obligation and the
notes are denominated in Canadian dollars, the Company is exposed to
fluctuations in the related exchange rate. A $0.05 change in the rate of
exchange of U.S. dollars into Canadian dollars applied to the Cdn. $691.1
million principal amount of CanWest debentures at June 30, 2003 would result in
a $34.6 million loss or gain to the Company. Management is evaluating various
options to reduce the exposure to foreign currency fluctuations with respect to
the CanWest debentures at a reasonable cost.

Electronic Media Management holds the view that newspapers will continue
to be an important business segment of the media industry. Among educated and
affluent people, indications are that strong newspaper readership will
continue. Alternate forms of information delivery such as the Internet could
impact newspapers, but recognition of the Internets potential combined with a
strong newspaper franchise could be a platform for Internet operations.
Newspaper readers can be offered a range of Internet services as varied as the
content. Virtually all newspapers are now published on the Internet as well as
in the traditional newsprint format.

Item 4. Controls and Procedures

Controls and Procedures Pursuant to Exchange Act Rule 13a-14, an
evaluation of the effectiveness of Hollinger International Inc.s disclosure
controls and procedures was undertaken by its Chairman and Chief Executive
Officer and its Vice President Finance and Chief Financial Officer, the
Companys principal executive officer and principal financial officer,
respectively, as of June 30, 2003. Based on that evaluation, the Chief
Executive Office and the Chief Financial Officer have each concluded that the
disclosure controls and procedures were effective in providing reasonable
assurance that material information requiring disclosure in this filing was
brought to their attention on a timely basis. There have been no changes in the
Companys internal control over financial reporting during the most recent
quarter that would materially affect, or are reasonably likely to materially
affect, the Companys internal controls over financial reporting.

Limitations on Effectiveness of Controls Notwithstanding managements
conclusions, a control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of the
system are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within the Company have been
detected. The design of any system of controls also is based partly on certain
assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions.

Current Report on Form 8-K, filed as of April 4, 2003, regarding
the announcement of the Companys results for the year ended December
31, 2002. The Form 8-K was filed pursuant to Item 12, Results of
Operations and Financial Condition.

ii)

Current Report on Form 8-K, filed as of May 27, 2003, regarding
reaching an agreement in principle with Southeastern Asset Management
Inc.

iii)

Current Report on Form 8-K, filed as of June 18, 2003, regarding
the Company establishing a Special Committee to conduct an independent
review and investigation of allegations raised by Tweedy, Browne
Company, LLC.

iv)

Current Report on Form 8-K, filed as of July 25, 2003, wherein the
Companys Board of Directors announced that Graham W. Savage and the
Honourable Raymond G.H. Seitz have been named Directors of the Company.

45

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.